The S&P 500 has closed higher for the ninth time in the past 10 sessions, with defensive and value stocks taking their turns to lead the gains after data showed US private payrolls expanded last month but at a much slower pace than expected.
The indexes gained steam in afternoon trading and hit session highs in the final half hour.
The Federal Reserve’s “Beige Book” report showed a modest increase in activity for US businesses and an increase in employment through late August while economic growth remained sluggish in parts of the country.
The blue-chip Dow edged closer to its February 12 record high, coming in just 1.6 per cent below the milestone while the tech-heavy Nasdaq, which closed the session almost 23 per cent above its pre-crisis high, rose at a slower pace on Wednesday.
While much of the rally from March lows has already been fuelled by Federal Reserve support, Lindsey Bell, chief investment strategist at Ally Invest, said investors may still be digesting the central bank’s policy announcement last week which indicated continued support.
“What you’re seeing today is a bit of a rotation after yesterday’s blockbuster day,” said Bell.
“Unless you really think tech is going to completely crash it can take a breather and allow some of the other value-oriented and cyclical sectors to take the reins for a while.”
The Dow Jones Industrial Average rose 454.84 points, or 1.59 per cent, to close at 29,100.5, the S&P 500 gained 54.19 points, or 1.54 per cent, to 3,580.84 and the Nasdaq Composite added 116.78 points, or 0.98 per cent, to 12,056.44.
In comparison the S&P value index rose 1.8 per cent while the growth index added 1.4 per cent.
The defensive utilities, consumer staples and real estate, which have trailed the broader market this year, were some of the biggest gainers among major S&P sectors on Wednesday, rising between 2.0 per cent and a little over 3.0 per cent.
Health stocks also closed up 2.0 per cent.
Financials, a value sector which has also sharply underperformed this year, closed up 1.5 per cent on Wednesday.
The high-flying technology sector ended the day up 0.9 per cent but at least one trader said investors showed up looking for bargains after it had turned negative in the morning.
“It’s buy the dip. Tech got wrecked in the morning and then everyone said this was their big chance to jump in,” said Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas.
US private payrolls increased last month from July, according to the ADP report, but fell short of economists’ forecast.
Investors are now waiting for the government’s comprehensive employment report which is slated for Friday.
Janet Walker, senior portfolio manager at Abbot Downing in San Francisco, expects Friday’s government payroll numbers to also reflect a stalling from July to August.
As a result she says it will be important for US politicians to reach an agreement for a new fiscal coronavirus relief bill.
Weakness in the jobs report “could become a bigger risk if there’s a delay in stimulus,” she said.
“For us to continue to recover we’re going to need to see additional stimulus.”
Nvidia Corp, one of the benchmark’s biggest boosts on Wednesday, gained after several brokerages hiked their price targets on its shares after its announcement of powerful gaming chips in collaboration with Micron Technology Inc and Samsung Electronics Co Ltd.
Advancing issues outnumbered declining ones on the NYSE by a 1.91-to-1 ratio; on Nasdaq, a 1.56-to-1 ratio favoured advancers.
The S&P 500 posted 89 new 52-week highs and no new lows; the Nasdaq Composite recorded 148 new highs and 45 new lows.
On US exchanges 9.85 billion shares changed hands compared with the 9.12 billion average for the last 20 sessions.